NATO Secretary General’s comments support European defense stocks

Shares of European defense companies started the week with clear gains after remarks by NATO Secretary General Mark Rutte, who noted that weapons manufacturers are increasingly struggling to keep up with the surge in orders.

For the market, this was another signal and confirmation that the biggest challenge for European industry is not demand, but the industry’s ability to deliver equipment on time.

Italy’s Fincantieri stood out the most, with its shares rising by more than ten percent.

Gains were also recorded by, among others, Leonardo, Saab, Hensoldt, Rheinmetall, Thales, Indra, Dassault Aviation, and Safran, up in the 2 to 5 percent range.

Technical analysis of Fincantieri (FCT.IT) (D1)

The Italian manufacturer of systems intended for naval warfare has lost more than 60 percent of its valuation from the peak at the end of 2025. Today’s gains are impressive and very much needed on the demand side if it wants to regain the initiative, but they may not be enough to change the longer term trend. The company’s valuation is weighed down by a “death cross” from March 2026. Investors should track the price in relation to Fibonacci levels. Only a move above the 38.2 percent Fibonacci level can be treated as a meaningful signal that offers hope for a return to an uptrend. Source: xStaion5 

Investors’ reaction shows that the market is increasingly pricing in not only higher defense budgets, but also a potential improvement in margins and in the negotiating power of manufacturers operating at maximum capacity utilization.

Rutte pointed out that NATO is only now moving from the stage of political declarations to the stage of executing orders. According to NATO data, European allies (and Canada) increased defense spending by 20 percent versus 2024, to more than USD 574 billion. At the same time, under the new target, allies are to reach 5 percent of GDP for defense and security related spending by 2035.

Rutte also noted that constraints concern both industrial capacity and the ability to recruit and train military personnel. According to his remarks, around USD 300 billion in orders has already gone to U.S. arms manufacturers, which further illustrates the scale of demand generated by NATO countries.

From the perspective of European defense companies, this is an ambiguous but market positive signal. On the one hand, limited production capacity means the risk of delays, pressure on supply chains, and the need to incur high capital expenditures.
On the other hand, if demand is structural and long term, manufacturers can count on longer order backlogs, improved revenue quality, and potentially better contract terms.

An additional catalyst is the upcoming NATO summit in Ankara, scheduled for July 7 to 8. The meeting is set to focus on defense spending, transfer and logistics capabilities, and further support for Ukraine. A particularly promising area for additional spending may be drones and counter drone systems.

From a sector sentiment perspective, it is absolutely crucial that these gains are being seen in the context of Donald Trump’s comments that “Putin feels pressure” and that “the end of the war is closer than everyone thinks.” In the past, such declarations would have put significant pressure on defense company valuations. Today, however, the market sees more opportunities than risks for the sector’s valuations, which is important after several months of deep declines from the peaks.